Home Health & Hospice Week

The new year has left suppliers and pharmacies furnishing drugs used with home respiratory equipment gasping for breath.

Medicare will reimburse providers only 80 percent of average wholesale price for albuterol sulfate and ipratropium bromide, two widely used respiratory drugs, according to a notice in the Jan. 7 Federal Register. That's a change from the 95 percent of AWP reimbursement formula used for years.

Medicare contractors are in the process of implementing the pricing changes, which will be retroactively effective to Jan. 1.

"We are in for hard times," worries consultant Patrick Dunne with Healthcare Productions in Fullerton, CA. An indicator of just how hard can be seen in Wall Street's reaction to the cuts. When the handwriting became clear on the legislative wall, respiratory giant Lincare Holdings Inc. stock went from $42.35 per share Nov. 14 to $29.45 at press time.

Drug pricing changes were enacted as part of the Medicare Prescription Drug, Improvement and Modernization Act (MPDIMA) President Bush signed into law last month (see Eli's HCW, Vol. XII, No. 43, p. 339). Centers for Medicare & Medicaid Services officials emphasized in a special Open Door Forum in December that they were working as quickly as possible to implement MPDIMA provisions on time. "We're going to be working at a very fast pace for the next several months to get all the bill's provisions into forward motion," said CMS Acting Administrator Dennis Fitch.

The law specifies that most drugs' reimbursement rates drop to 85 percent of AWP Jan. 1, but a list of 29 drugs investigated by the HHS Office of Inspector General and the General Accounting Office were singled out for more drastic cuts.

Albuterol Available At 17 Percent of AWP, Feds Claim 

The OIG and GAO claimed in recent reports that albuterol sulfate was widely available for an average of 17 percent of AWP, and ipratropium bromide was available for 34 percent of AWP. However, the law specified that no drug could be cut to less than 80 percent of AWP for 2004, so suppliers were spared those rock-bottom rates.

One exception to the cut to 85 percent of AWP is for infusion drugs. "Infusion drugs will be paid at 95 percent of AWP ... when furnished through a covered item of durable medical equipment," says the notice.

Medicare will also make exceptions for drugs whose manufacturers submit data that shows 85 percent of AWP doesn't cover the acquisition cost of the drug, the notice explains. Manufacturers had until Jan. 1 to apply for that exception.

Medicare will switch to paying for drugs based on average sales price (ASP) in 2005, and manufacturers must submit their first data for the ASP system April 1, CMS said in the forum. The submissions will cover data for the first quarter of 2004, and as indicated in the law, will be kept confidential.

Once suppliers hit the ASP system, they still won't be in the clear, Dunne warns. If AWP and ASP cuts fail "to achieve significant reductions, Medicare will then look at what other government programs are paying for similar drugs to achieve comparability," he predicts.